What is a Joint Demat Account?
Before delving deeper, you must know that a Demat account is used to hold electronic securities. When you purchase securities on a stock exchange, they are delivered to your Demat account. Investors without Demat accounts need to hold physical trade certificates. On the other hand, securities are safe within a Demat account in electronic form.
A joint Demat account has multiple holders. Investors can co-own a Demat account with family members, relatives, or friends. As per the norms, a Demat account can have up to three holders, called the joint account holders. A joint Demat account will have a primary holder, and others are secondary holders. Two or more people can use their expertise to manage the Demat account effectively.
How to Open a Joint Demat Account?
You can apply for an online Demat account to skip the long queues. However, you must follow the account opening process, which is as follows:
Select a Reputed DP
Investors depend on Depository Participants (DPs) to open new Demat accounts. You can also rely on stockbrokers. A depository participant in India will be registered with NSDL, CDSL, or both of them. NSDL and CDSL are the two main depositories in India for dematerialised or electronic securities. Most DPs offer the joint Demat account facility in India. They also allow applicants to submit their Demat account applications online.
Fill Out the Demat Account Form
The DP will provide you with a joint Demat account form. You must provide some basic details in the application, like name, age, address, and mobile number. In the case of a joint Demat account, all holders must provide their details as well. However, the correspondence address is usually of the primary account holder in the form. The DP sends all communications to the address of the primary holder. All account holders must ensure that details in the form are accurate.
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Submit KYC Documents
The Demat account form is not the only thing required by the DP. Stockbrokers and depository participants are obligated to collect more details of the customer via KYC (Know Your Customer) verification. The KYC verification step is also mandatory for Demat account applicants. Each account holder must submit their KYC details. Certain documents are required to complete the KYC verification step. You must provide your PAN, Aadhaar card copy, cancelled cheque, passport-size photos, and other documents.
In-person verification is also required as per joint Demat account rules. All the account holders must visit the DP’s office and sign a few documents. However, the in-person verification step is being completed online by some brokers. With the rise of e-KYC or electronic KYC, some brokers are completing the verification process online. Once the DP or broker has completed the verification, you will receive the Demat account credentials.
Benefits of a Joint Demat Account
Two or more individuals can co-own a Demat account. It is essential when you have to share rights and responsibilities between individuals. Here are some advantages of opening a joint Demat account in India:
You and your investment partner(s) can keep track of holdings. All account holders can log in to the joint Demat account and view holdings.
A joint Demat account allows individuals to enjoy investment opportunities together. For instance, a married couple can invest in shares together and build a strong portfolio.
A joint Demat account helps individuals with estate planning. In case of the demise of an account holder, the ownership of the account (with securities) can be transferred to other holders. Other account holders will be saved from the lengthy ownership transfer process.
How to Add Joint Holder to Demat Account?
You must decide to have Demat account joint holders when applying with the DP or broker. Submit details and KYC documents of all account holders to the concerned DP or broker when opening a new account. However, the problem arises when you try to add joint account holders to an existing Demat account. Most DPs and brokers do not allow the conversion of a single-holder Demat account into a joint account.
In case you want to add joint account holders to an existing Demat account, applying for a new account is the only option. You can also choose to close the old Demat account having a single holder. Don’t forget to transfer your securities to another account before closing the Demat account. Also, consult your broker once regarding the rules to add joint account holders to a Demat account.
What Happens in the Case of the Death of a Joint Holder?
In case of the death of a Demat account holder, the joint holders are entitled to the securities. Also, the joint Demat account ownership is distributed between the remaining holders. The rules might change when account holders have provided a nominee. The ownership of securities will be transferred to the nominated individuals in such a case. While opening a joint Demat account, you will sign an agreement. Based on the agreement, the asset will be transferred to the remaining account holders or the nominee after the demise.
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The joint Demat account facility is perfect for managing investments together with business partners, friends, and family members. Up to three individuals can open a joint Demat account in India. Also, all account holders must provide their KYC details for a new joint Demat account. Learn more about the joint Demat account rules now!